In defence of Indian Railway and decoding Debroy report

The Bibek Debroy committee, set up a year ago to suggest reform and restructuring of Indian Railways, began its exercise with the premise that all state-owned railway organisations are a failure! Taking a cue from the extensive privatisation carried out in the UK and across the European Railway systems, it is determined to unbundle the compact railway organisations into various components with separate profit centres.

A major part of this exercise will involve separating infrastructure from train operations to provide a level playing field for private players to enter both freight and passenger business. In short, they are to reap the benefits of the vast 65,000 km of rail network without having invested a single rupee in creating it. 

Amongst the four key reasons listed for the failure of state-owned railways in the report, perhaps, the first is most valid for Indian Railways (IR). Misguided intervention, in this case by its political masters, who according to the report ‘have often imposed unsustainable fare and service conditions, overestimating what can be accommodated through internal cross-subsidies. Moreover, passenger fares have been kept at unsustainably low levels and new trains have been introduced on economically unsustainable routes.’

However, the other causes mentioned by the committee – excessive operating costs, perverse management incentives, lack of dynamism, etc. – are perhaps not based on facts. For instance, charges of over staffing and poor operational efficiency with regard to the IR have been made without appreciating the ground realities. Forced by the need to be self-reliant to conserve precious foreign exchange, historically the IR has developed over the years its own facilities for maintenance and manufacture of the locomotives and rolling stock it needs.

No less than seven of them – Chittaranjan Locomotive Works, West Bengal; Integral Coach Factory, Tamil Nadu; Rail Coach Factory, Punjab; Wheel Axle Factory, Bengaluru; Diesel Maintenance Works, Punjab; Rail Spring Karkhana, Madhya Pradesh and another Wheel Axle plane in Bihar – save over Rs 20,000 crore of foreign exchange annually!

These facilities and the railways’ numerous staff colonies came up mostly in very small towns such as Gooty, Patratu, Katni, Rayanapadu etc, where land was relatively cheap. Hence, basic staff welfare amenities such as schools and hospitals also had to be provided at such locations and along with it came the Railway Protection Force.

These activities are not in-house for the US or European railroads and as such, the Debroy committee comparing the overall staff productivity for IR with these systems is somewhat akin to comparing apples with oranges. Moreover, as charged by the committee, these so-called non-core activities have not, in any way, distracted the management nor been the cause for worsened finances. The blame for IR’s worsening finances has to be squarely laid at the door step of its political leadership with its blatant acts of financial profligacy and populist measures, such as refusing to raise passenger tariff for over a decade!

Understandably, with a plethora of such in-house activities, the IR’s wage and pension bill is bound to be high, almost half its operating expenses. Moreover, as claimed by the committee, capital investments have certainly been poorly targeted over the last two decades for which, once again, IR’s political leadership is responsible.

The charges of ‘perverse management incentives’ involving restricted entry into the rail sector is once again not borne by facts as there are no less than 17 private operators who are now actively competing  with the IR’s own Concor (Container Corporation) and earning profits in the process.

Charge of unwillingness

The charge of unwillingness to pool resources such as terminals, unwillingness to lease have, perhaps, been based on the one-sided inputs from private operators, for Concor never got an opportunity to present its view point.

For instance, Concor, which has built a customer base assiduously over the years, is certainly not going to watch the private operator poach it away by offering under-the-table discounts. Therefore, its reluctance to share or ask for a higher lease charges for using its facilities. Similarly, a private operator reportedly wanted Concor to run its container train empty in one direction while its was unwilling to do so with its own fleet of container flats.

If anything, the charge of ‘lack of dynamism’ does not apply, at least to the IR. The PRS (Passenger Reservation System), a world class facility, provides over a million tickets a day at the click of a mouse, Wi-Fi is available on select premium trains and station premises, the exact location of the train is available 24X7 on a mobile phone, not to forget a hike in passenger and freight business of almost 100 per cent over the last three decades cannot be achieved without an element of dynamism in the 1.4 million-strong behemoth! 

The committee’s conclusion that ‘being a monopoly excludes or limits the possibility of providing innovative forms of lower cost rail transport, and as a result of a monopolistic ‘take it or leave it’ attitude the IR has failed to meet the transport demands of both poorer groups and richer groups willing to pay for more comfort,’ is once again not based on hard facts.

The IR’s passenger tariff is perhaps lowest in the world, even lower than China, with a string of ‘Garib Rath’, ‘Sampark Kranti’, and ‘Jan Shatabdi’ express trains providing affordable AC travel to the poorest segment of the 1.2 billion citizens, while Rajdhani express trains provide a level of  luxury and comfort matching the airlines, and certainly far superior to USA’s Amtrak.

(The writer is a former Member, Railway Board)